The most common types of entities doing business in the USA
Many foreign companies in the US operate as corporations, with each state having its own rules. There are frequent cases where a corporation is formed in accordance with the laws of one state while having its registered office in another. Nonetheless, it makes the most sense to set up a company in the state in which you will be doing business. When doing that, it is necessary to submit the certificate of establishment to the Secretary of State in the chosen state.
The internal structure and bylaws of the corporation are similar in all states, but they can be adjusted in such a way that they also fit the needs of individual companies. Directors of an American corporation can be foreign nationals and must be natural persons and not foreign companies.
The most common form is a corporation C, which is taxed at the corporate income tax rate, separately from the owners of the company. That means that profits distributed among the owners are taxed twice; first on the level of companies and then on the level of owners. American companies can avoid this by setting up a corporation S, which is not available to foreign companies.
A foreign company may also choose to open a branch in the US, but this option is not recommendedunless an American lawyer specifically recommendsit to us. In this case, the company is subject to taxation and organization as is the case for all U.S. companies.
Limited Liability Company (LLC)
The limited liability company is managed by the members who own the company. In this case, we can decide whether to be a company taxed as a corporation or the income will be passed on to members and taxed at member level. Members’ personal liability is limited to their investments.
Any foreign company may also choose to partner with another entity to do business together in the USA. In this case, it is recommended to have a written agreement, although not strictly necessary and binding. It can also be drawn up by oral agreement or without any documentation or filing with the state.
To identify a business and file taxes, each new business in the USAmust obtain the Employer Identification Number (EIN)from the Internal Revenue Service.